Clunkers cash flow dries up; dealers wonder what's next

HOWARD FRANK

Tuesday

Sep 29, 2009 at 12:01 AM

The flow of dough from the cash for clunkers stimulus package had most local auto dealers smiling, but the demand created by the stimulus program has left a void. But the crush of demand created by the stimulus program left a void. It accelerated the buying process for some consumers, but may have left others waiting on the sidelines, hoping the government will sponsor another rebate program.

The flow of dough from the cash for clunkers stimulus package had most local auto dealers smiling.

But the crush of demand created by the stimulus program left a void. It accelerated the buying process for some consumers, but may have left others waiting on the sidelines, hoping the government will sponsor another rebate program.

The best news, though, for most area car retailers, was the program stimulated business, as intended. And the dealers have been receiving rebates from the federal government, as promised.

"They probably paid on everything within 20 or 30 days after we sent them in," John McDermott, owner of Major Motors in Stroudsburg said.

The government has paid virtually all of Major Motors' rebates so far. The dealership carries the Mitsubishi, Hyundai and Kia brands.

To help stimulate the hard-hit auto industry, the federal government offered consumers a chance in August to dump their old clunker for a newer, more fuel-efficient vehicle. Buyers of qualifying vehicles received a credit of between $3,500 and $4,500 towards the purchase of a new car under the Car Allowance Rebate System — CARS program.

A couple of McDermott's applications for the rebate were rejected, but he said it was only for things the processors couldn't read, and could be re-submitted.

But the post-rebate climate is similar to the rest of the economy, with potential car buyers waiting on the sidelines hoping the government will offer another mutlibillion-dollar stimulus package.

"Now, it's slow. People want to see if it's happening again and they are holding off. I hope they would do it. It was the one stimulus package that worked. Look at GM and Chrysler. They put on extra shifts," he said.

Andy Patton of Halterman's Auto Ranch in East Stroudsburg said the program worked better than he expected. "It's actually coming through pretty clean," he said of the rebate reimbursements. "There are some issues, but not half the issues we thought we'd have."

Halterman's, which carries the Scion and Toyota brands, has been paid on all their rebates. It took about a month to get the money, Patton said.

But he too has felt some of those no-more-clunkers blues.

"We went slow. This month has been a bit of a struggle. I think a lot of the urgency went away. September is notoriously a slow month, with Labor Day and school starting. Second half is better," he said.

The program may have stolen some sales from the September numbers at Haltermans. The cash for clunkers program "pulled through a lot of buyers that wouldn't have come in," Patton said.

William Rinehart of Gray Chevrolet in Stroudsburg said that as of last week, the dealership had received all its reimbursements for the cash for clunkers program. Their experience was similar to other area dealers.

—It took approximately four to six weeks from sale to reimbursement for each car," he said.

Rinehart credited the program with stimulating business.

"The cash for clunkers program was a tremendous help. It gave a great boost to our sales and lot traffic, and we were more than pleased with the program," he said.

The CARS stimulus package had another benefit: It helped put Gray in an improved position for the new model year.

"Because of cash for clunkers, we were able to move many cars off the lot. This helped clear out our inventory, giving us a chance to refresh it with all new and improved 2010 models hitting the lot over the next few weeks. We're pleased to have a new and amazing lineup to offer our customers in the months to come," he said.

Not everyone was thrilled with the program.

Jim Ertle of Ertle Subaru said the dealership was still waiting on most of its rebate applications.

"We're receiving them in spurts. A lot of them, they push multiple errors," requiring the applications to be resubmitted, he said.

But the real problem, according to Ertle, is the lack of product from the last-minute nature of the program.

It was such a quickly promoted retail fix that manufactures couldn't build cars fast enough.

"So what we made in August, we gave back in September by not having proper inventory levels," he said.

Some dealers have promoted their own, non-government cash for clunkers program. Although the government won't provide the capital for a rebate, the dealers don't have to destroy the clunkers. So those trade-ins junkers have a value that dealers can use to recover some of their promotional dollars.

But don't count Halterman's as one of them. "It just seem like there's a hundred people out there doing it now, so we are just not going to do it," Patton said.

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